Applying for a Loan: What Can You Do If You Have Bad Credit?
October 08, 2020
Getting over a bad financial situation can be more challenging if you don’t have the credit to apply for viable loans. It’s a typical dilemma that many people have, especially when they encounter considerable expenses like emergency medical procedures.
Applying for a loan requires you to have good credit. However, you can’t build on your good credit if you’re financing a financial dilemma. Although it may seem like there aren’t any solutions, you can apply for personal loans to consolidate high-interest debt as a financing option.
Applying for a personal loan with bad credit
Traditionally, applying for personal loans will be close to impossible if you have bad credit and unreliable credit history. Thankfully, some lenders specialize in providing loans to people that have bad credit. This allows you to take these deals while you’re building your credit scores back up. There are plenty of online-only lenders that offer flexible personal loans for bad-credit applicants.
Every lender has its own criteria for accepting a borrower’s application for a loan. Most of them generally focus on your credit scores to see if you’re a viable applicant. However, some lenders have a more straightforward process for faster approval.
Understanding personal loans
The costs of a personal loan will vary, depending on the loan terms and your current financial standing. Generally, personal loans for bad credit applicants cost more compared to those with higher credit scores.
Traditional banks may not require you to pay origination fees when you apply for a personal loan. However, it will be more challenging for people with bad credit to pursue this option. In contrast, online lenders will be open to receiving bad credit applicants, as long as the origination fee is included in the annual percentage rate. The value of the origination fee will vary depending on how low your credit score is. It’s a safety measure for lending companies to gauge if you’re a risky borrower.
Realizing the consequences of bad credit
Applying for a personal loan impacts your credit in different ways. From one angle, it can add to your credit report and increase your credit mix for future applications. Additionally, it can boost your credit since your personal loan will add to your repayment history.
However, you may end up getting a lower credit score than when you started if you’re unsuccessful in committing to your personal loan’s deadlines. You must think of personal loans not as an emergency solution but as an added responsibility to your financial duties.
Looking at your financial history
Keep in mind that your credit scores aren’t the only factor that lenders look at when applying for a loan. You can also present proof of income and other assets so that they can gauge your financial standing. Several personal loan lenders are adapting alternative data for approving the application for a personal loan. This means that they look beyond the traditional factors that contribute to a bad credit score. It’s advantageous for people who want to improve their credit scores while having the financial aid they need.
Conclusion
You can’t control unexpected financial emergencies from happening. However, you do have a say on how well you manage your finances during your day-to-day spending. Remember to be diligent when paying your monthly bills so that you can build a credible credit score to avoid applying for disadvantageous loans in the future.
The development of technology also advances the way we perform different tasks in our lives. Hoopla Loans is an online-based loan broker in South Africa that provides borrowers with an efficient application system. Get in touch with us today, and we’ll help you apply for anything from payday loans to personal loans for your needs!